Save Article

Stealth Tax

Updated May 5, 1997 12:01 a.m. ET

Business partnerships have had a rough ride in the Clinton era. Back in 1993 budgeteers walloped doctors, lawyers and accountants by lifting the cap on Medicare taxes so that general partnerships must pay a flat 2.9% rate on every dollar the office bills. Now it is limited partnerships' turn for pain. Early this year the IRS put out a new rule saying that they too must pay the 2.9% rate on the firm's earnings. Like most tax tweaks, this one sounds bearable until you consider the consequences. The new IRS rule--an edict, really--will punish small investors for the riskiest and most important part of their work: spending...